Game Time Live, a social gaming company based in Highland Park, Illinois, has found a sponsor for their popular real-time sports prediction game GameSlam. Chicago White Sox manager Ozzie Guillén, who won a World Series with the Sox in 2005, has officially been bestowed the prestigious title of “Slambassador” for GameSlam, according to ChicagoNow. READ MORE
When the Boston Red Sox reversed their curse in 2004 by vanquishing the Yankees and going on to take the World Series, many fans and pundits were quick to give much of the credit to management’s decision to enlist sophisticated computerized analyses of player performance data to make staffing decisions. This year, the team’s all-too-familiar collapse left these same observers wondering how the numbers could have led the Red Sox astray. Einstein kept a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.” Baseball fans are not the only ones being forced to consider that the best decisions aren’t necessarily the ones based on analyzing reams of data. Companies of all sorts are setting themselves up for the same hard lesson, thanks to the growing excitement over technology’s ability to place all manner of salient data at the fingertips of managers. Armed with so-called dashboard displays on their PCs, CEOs can effortlessly summon up a cornucopia of performance indicators. Call up this week’s sales by product line, throw in profit by region, cost per widget produced, and change in inventory levels. Compare it all with last week, with the same week last year, and with forecasts and goals. And there you have it: a comprehensive guide to the organization’s performance and to what you need to do to improve it. If only it were that easy. The fact is, this sort of data worship can provide a distorted, misleading view of what’s going on, and it can lead to flat-out bad decisions. Part of the problem is that some of the most important inputs aren’t easily quantifiable. (Einstein used to keep a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.”) Adam Galinsky, an associate professor at Northwestern University’s Kellogg School of Management who studies decision making, notes that a bias toward hard data causes organizations real harm. “Things that are hard to quantify tend to get left out of the decision-making process,” he says. For business owners, there are all sorts of intangible or hard-to-quantify factors that can mean the difference between life or death: employee morale, the emergence of new technologies, changes in the competitive landscape, evolution in customer tastes. Think of executives at Ford (NYSE:F) and GM (NYSE:GM) endlessly twiddling with the easy-to-track impact of rebates, advertising, and health care costs, while remaining oblivious to the cultural and political forces–forces that helped trigger higher gas prices–that spelled doom for their obsession with SUVs. This isn’t a new problem. Managers have always had a misplaced confidence in numbers. But the ability to do more and more with the data in an increasingly high-tech fashion is making things worse. Indeed, the availability of slick new data-crunching tools, and the hype they’re receiving, leads executives to rely on them more. Good managers know the nonnumerical stuff matters, of course, but it sure must feel as if you’re being highly effective when you can dash off a few e-mail notes and then in a few days or even hours watch those real-time graphs leap skyward on your screen. And, of course, companies can’t help but treasure these data tools, given that they’ve spent a fortune investing in them, egged on by consultants and other experts. Thus, the CEO risks becoming Nero, fiddling with his keyboard, as it were, while the company burns. The problem goes beyond neglecting the intangibles. Sometimes the data that goes into a dashboard is incomplete or biased in subtle but significant ways that can lead a manager astray. Jorge Grau, the CIO at cell-phone-tower operator SBA Communications (NASDAQ:SBAC) in Boca Raton, Florida, helped build a system to place virtually any sort of real-time report in the hands of managers. But there have been occasions when managers, delighted by the sheer number of facts at their fingertips, were oblivious to problems with the data. “We’ve been bitten,” Grau says. In several cases, managers were making decisions based on summary performance for the entire company, not realizing that those numbers did not include data from a few key regions. When data is misread this way, it can lead to bad calls on anything from budgeting to promotions. “Reports can do more harm than good,” Grau says, which is why he now cautions managers about accepting a slick table of figures at face value. Even when the data is complete, there are plenty of ways to misinterpret it. One temptation for managers is to assume that when two sets of numbers go up and down together, changing one will lead to a change in the other–inspiring a CEO, for example, to order up a series of costly facility upgrades simply because the last two facility investments happened to be followed by sales spikes. “You can find correlations between the most improbable things, if you look for them,” says Luca Rigotti, a decision sciences researcher at Duke University’s Fuqua School of Business. “You’ll just end up doing silly stuff.” In fact, there’s a range of potentially costly psychological tricks that managers can inflict on themselves in the face of perfectly solid data, says Northwestern’s Galinsky. For example, the same set of numbers can provoke wildly different decisions depending on the order in which the numbers are presented. That’s because people tend to jump to conclusions based on the first numbers they hear, and they don’t allow the later figures to change their minds. The same numbers can also have different impacts depending on how they are framed–for example, stating that 10 percent of the customer base will defect if a product is changed, as opposed to stating that 90 percent will stay. “Managers need to protect themselves against falling for those sorts of biases,” says Galinsky. Even if you avoid false correlations and biases, you’re still in danger of getting smacked by the law of unintended consequences when you try to manage by dashboard, says Christopher Zappe, who studies decision sciences at Bucknell University. “People tend to respond to falling numbers with a knee-jerk reaction to try to halt the fall,” Zappe says. “But it often ends up aggravating the situation because they often don’t really understand the ways in which the different things going on at an organization affect each other.” Thus, the manager who sees the on-screen sales graph start to droop might order sales reps to increase the number of prospects they contact, not realizing that sales are falling because the reps are already stretched too thin. Or a jump in inventory might lead to a decision to slow production, even though much of the inventory is set to go out the door. None of this is to say that dashboards are the enemy here. Indeed, CEOs probably get into more trouble when they fail to bring enough data into the decision-making process. And companies that sell dashboard-related systems are themselves quick to point out some of the pitfalls of data-driven decision making. “The concept of data quality is a very unsexy part of our business,” says Kendall Collins, vice president of product marketing for Salesforce.com (NYSE:CRM). “But without it you’re not going to have the ability to make decisions or react in an intelligent way.” Dashboards also can be modified to deal with the problems. Howard Diamond, CEO of ePartners, an Irving, Texas, consultancy that installs information systems that often include executive dashboards, notes that even intangible aspects of a business can be brought into a dashboard if companies are clever. For example, part of the Cool Cuts 4 Kids chain of hairstyling shops, an ePartners client, wanted to track trends in customer satisfaction. The company’s system will chart the number of customers who fail to return within 10 weeks. But part of the key to success also has to be to retain a certain amount of healthy skepticism about the value of the information we get from our computers, no matter how slick or costly the system. That, and not trading Babe Ruth to the Yankees. Contributing editor David H. Freedman (whatsnext@inc.com) is a Boston-based author of several books about business and technology. His latest, A Perfect Mess, co-authored with Eric Abrahamson, will be published by Little, Brown in January.
E-diaries This summer’s hot documentary tells the riches-to-rags story of an Internet start-up. Steven Soderbergh, can we talk? In January I received an excited e-mail from my friend Corey, who was attending the Sundance Film Festival, in Park City, Utah, and had just seen a movie called Startup.com. “It’s your E-Diaries column on film!” she wrote. Intrigued, I poked around the Sundance Web site and learned that Startup.com is a documentary that chronicles the rise and fall of an Internet company called GovWorks. The film was produced by some of the same people who worked on The War Room, the documentary in which James “Ragin’ Cajun” Carville spin-doctors Bill Clinton to the presidency. This was exciting stuff! Were Internet entrepreneurs, so recently spurned by the media and the investment community, poised to become Hollywood darlings? If so, what could I get for the film rights to The Gazooba Story, that roller-coaster thrill ride of passion, intrigue, and viral marketing? And who would play me? Brad? Ethan? Keanu? I quickly settled on Chow Yun-Fat to play the part of my Japanese cofounder, Zen. I could picture Chow whipping out the Green Destiny sword whenever a board member pushed back on our expense projections. Startup.com wasn’t in general release yet, but I couldn’t wait to see it. So I called the distributor and requested a screening. “Will you be rating it on a star system or writing a feature about it?” asked the distribution woman. I hesitated for a moment, unsure if having written a college paper applying Freudian theory to Hitchcock qualified me to wield my very own star system. “Feature,” I replied reluctantly. She said she’d mail me a press copy. It arrived, Zen came over, and we fired up the VCR. The action of Startup.com takes place between May 1999 and December 2000. GovWorks founders Kaleil Isaza Tuzman and Tom Herman are high school buddies who, as adults, decide that putting municipal-government processes like parking-ticket collections on the Internet represents a bigger opportunity than online tombstones. So Kaleil quits his job at Goldman Sachs and becomes GovWorks’ CEO. Tom is chief technology officer, something never actually stated but easily deduced from the fact that his subordinates carry Nerf guns. The cofounders set up shop in a loft in Manhattan: very Silicon Alley. Kaleil is the front man, the pitchmeister. Since one of the film’s directors was Kaleil’s roommate, Zen and I were treated to an intimate shot of Kaleil getting up late for a VC meeting and running to the shower in his underwear. (Note to self: If asked to star in The Gazooba Story, insist on a body double for scenes in which the word Jockey is legible.) We watched Kaleil score an appointment with Kleiner Perkins, and Zen’s eyes clouded over. At Gazooba we had gotten money from Kleiner’s Sand Hill Road neighbors but never saw the inside of the Valley’s most prestigious firm. As we listened to Kaleil talk about getting skewered by the Kleiner guy for having the gall to locate GovWorks in New York, Zen looked like a kamikaze pilot who had pulled up at the last moment. “I would have loved to have been rejected by those guys,” he said wistfully. Other incidents made us squirm. In Startup.com, the founders’ friendship is tested when, in front of a potential lead investor, Tom challenges Kaleil’s explanation of the business plan. Back at the office Kaleil is incensed. “We should all trust that any one of us will represent a vision of the business that will be seconded and thirded and fourthed and fifthed by other members of the team,” he rages, after kicking around some furniture. The scene rang so true to our own epic confrontations that Zen and I couldn’t look at each other. It was like being at a Chicago White Sox reunion and watching Eight Men Out. Then came the Citizen Kane stuff. Kaleil and Tom raise $60 million. Kaleil appears on CNBC. The company hires more than 200 people. Kaleil’s girlfriend asks for a commitment or a dog. As our heroes’ fortunes rose higher and higher, I could imagine an audience full of people who owned tech stocks a year ago sitting on the edge of their seats, hungrily anticipating the fall. Things start to unravel when competition heats up and the market cools. Like the adults in a “Peanuts” cartoon, Startup.com‘s VCs don’t appear on camera much. But when GovWorks fails to meet revenue targets, you don’t have to hear wha-wha-wha-wha-wha to know the investors are getting restless. “I’ve had some pretty ugly conversations with board members,” Kaleil tells Tom. “This is a serious crisis.” I won’t give away what happens next. But for a film with no explosions or special effects, Startup.com delivers more than its share of carnage. The saddest victim is Kaleil and Tom’s friendship, which, by film’s end, looks as though it’s been through the woodchipper in Fargo. Long after the credits rolled, the founders’ story stayed with me. Tom and Kaleil’s experience was so personal that I wondered how they felt about seeing it made so public. So I decided to ask them about it. Tracking down Kaleil on his cell phone in a Manhattan taxicab, I asked him what it was like to be the Gordon Gecko of dot-com entrepreneurs. “My visceral reaction was I’m mortified,” he said, multitasking between talking to me and offering directions to the cabbie. “Because it’s not fiction; it’s my life. It shows parts of ourselves that are not the parts we’re always proudest of.” Kaleil told me that the idea for a movie about GovWorks was originally his and Tom’s. “We thought it would be useful for business schools or people starting companies,” he explained. But Kaleil said his most valuable lessons weren’t captured by the documentary, because they came to him after the bulk of the filming was done. “It doesn’t just end with, you can’t do a financing, so you pack up your things and go home,” he said. “You care an enormous amount about the employees and the clients that you’ve promised things to and the relationships around the company.” According to a note at the end of the film, Kaleil went on to form Recognition Group, a company that brings turnaround specialists into distressed start-ups. What it doesn’t say — but what Kaleil told me — is that Tom Herman is once again his partner. I called Tom. “My first reaction was that it was hard to imagine I would want to do that again,” he told me. “What convinced me is that I wanted another chance to work with Kaleil. Also, I found what he was planning exceedingly interesting.” Asked for his reaction to Startup.com, Tom said that he wished it had fleshed out more of his professional strengths, like building a technology team and leading employees. “The movie was very one-dimensional in its portrayal of both Kaleil and myself,” he said. But it did teach him some brutal lessons about personal grooming. “I was so disappointed in my ability to dress well,” said Tom. “You realize the way you dress has an impact on people’s perception of you. I had such a bad shave through much of the movie.” You can judge Tom’s business and fashion sense for yourself, since the film should now be in theaters. Startup.com has been given an “R” rating, and entrepreneurs are strongly cautioned: it contains disturbing buzzword usage, explicit depictions of obscene valuations, and scenes of graphic cash squandering. Some material may not be suitable for people who still have a dot-com business plan on their hard drive. Andrew Raskin, founder and former CEO of Gazooba.com — now Qbiquity — can be seen in San Francisco-area theaters clutching a medium buttered popcorn and a cherry Icee. More E-Diaries. Please e-mail your comments to editors@inc.com.
When I founded Lillian Vernon Corp. on my yellow Formica kitchen table in 1951, I couldn’t have imagined selling to customers linked by little boxes called “laptops” to a “tabletop” of mine that is actually a big box called a server, located in cyberspace rather than physical space. Back then, a visit was a friend stopping by for coffee, the number of hits told us if the New York Yankees would make it to the World Series, and a web was spun by a spider. The only thing launched in the 1950s was a rocket in a Buck Rogers serial, and a site was something for sore eyes. User friendly? Well, in those days, we didn’t even talk like that in mixed company! So you could imagine my hesitation when, four and a half decades later, in 1995, we took our first steps into what is now called “e-commerce,” or selling electronically. That year, realizing that e-commerce would play an important role in the future of catalog retailing, we set up an online shop through America Online, where we thought our customers were most comfortable. The following year, we unveiled our own online catalog, featuring 200 of our best-selling items, at our new address on the Internet: www.lillianvernon.com. And in December 1998, we completely redesigned the site, expanding our online offerings to more than 400 products in nine categories. In doing so, we enhanced our customers’ ability to shop with computers. Go with the Flow In the process, I’ve gone from ignorance and trepidation about e-commerce to a passionate belief in its future. My journey mirrors my company’s long-standing willingness to embrace change to maintain its position as an industry leader. It parallels our realization that advances in technology are what powers change. In 1980, when we realized that telephone orders were increasing significantly, we promptly established a call center. My days of personally handling a small number of telephone orders were over. In 1982, we began operating the lines 24 hours a day, and a decade later, we switched to a toll-free number. In the late 1980s, when more people had access to fax machines, we installed a dedicated fax line, eventually making that line toll free as well. In short, I have had to go with the flow of technological change, because it has made ordering easier for my ever busier customers. In the case of e-commerce, acceptance involved overcoming skepticism. While I could understand how a telephone or fax machine could simplify ordering, I found surfing the Internet to be a totally foreign concept. The solution was to educate myself — which worked. Once I understood that a search engine wasn’t part of a rescue squad but an invaluable tool for enabling customers to find the right product, I was sold. With its ability to reference a key word, price, or category, the online index was handier than any in a printed catalog. Best of all, customers could use the tool in the privacy and comfort of their own homes and offices. Just the Facts, Ma’am When my marketing gurus convinced me to launch our first online catalog in 1996, I quickly became a convert. The turning point occurred during the 1996 Christmas selling season. After passing a crowded shopping mall, I thought to myself: Why wait in line when you can shop online? So I set to work creating a site that is fresh, attractive, interesting, informative, and, yes, “user friendly,” a word that I now love to toss around. During the last six months, we assigned two full-time staffers to work with a Web design agency to revamp the site, which now features more than 400 of our most popular products, as well as the ability to electronically order all 6,000-plus items from our eight catalog titles. Through the site, shoppers can also order from a gift registry, be reminded of gift-giving occasions, and even be advised of the “right” gift for family and friends. Our customer service department is only a mouse click away. Since graphics can be altered weekly, the site features holiday-specific themes, new catalogs and online specials. Best of all, encryption software makes using credit cards at our online store safer than at the local shopping mall. Keep the Personal Touch Deciding to embrace e-commerce was one of the most important business decisions I’ve ever made. But I wondered, at first, whether customers from my generation would think we were becoming too “high tech” and flock instead to competitors holding their ground against the technology. To address that issue, I decided to make a point of transferring the personal touch that has always been a hallmark of Lillian Vernon catalogs to the Internet. Our Web site features my photograph, a personal message from me, and an e-mail address by which customers can write to me. My staffers forward all messages requiring my personal attention. In addition, I determined that my online presence would supplement rather than replace our catalogs. I am frequently asked whether I will continue to sell in print, and my response is and always will be, ABSOLUTELY. I continually assure customers who aren’t computer savvy that catalogs will always be accessible the old-fashioned way. Making the Transition In bringing Lillian Vernon from tabletop to laptop, I’ve learned a lot of hard lessons. Our biggest challenge was finding the right people to build the Web site and its underlying database, a task that required both technical expertise and a sound understanding of our business and its goals for online sales. As other entrepreneurs make similar transitions, our experience suggests the need to accept change and embrace the technological innovations that are central to change. It suggests the importance of designing a site that is comprehensive, fresh, and secure. And it highlights the necessity of the vital personal touch that is the cornerstone of human interactions. While revenue derived from our online shop currently accounts for less than 1% of our total sales, I have no doubt that e-commerce will become increasingly important in the decade ahead. With the average dollar amount of our online order soaring 38% in a year, I don’t think I’ve been as excited about anything since I placed my first advertisement in Seventeen magazine nearly a half century ago. Now I anxiously await weekly statistics to see how many more Lillian Vernon customers are shopping online than in line. Copyright © 2000 EntreWorld.org
